Finance Highlights 2011 0415 - Laserfiche WebLink

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State Budget Issues of Concern to City Budgeters April 13, 2011 Library Funds Funding for the Public Library Fund, Library Literacy Grants, and California Library Services Act has been reduced from a combined $30.4 million to $15.2 million for FY2011 -12. More information as to the • specific local effects of these reductions is pending. • Motor Vehicle Fuel Tax Swap Clean -Up In March 2010, the Legislature and Gov. Schwarzenegger enacted a reduction in the state sales tax on • • gasoline with accompanied by a revenue neutral increase in the per - gallon state gasoline excise tax. The "fuel tax swap" exempted gasoline from the state sales tax (but not the local portions of the sales tax), and Increased the per - gallon motor vehicle fuel excise tax (also known as the Highway Users Tax or HUTA). Local allocations of the state sales tax on gasoline come to cities and counties under Prop42. Motor Vehicle Fuel Tax revenues come to cities and counties under Streets and Highways Code Sec 2101 -2108 and Calif Constitution Article XIX. The fuel tax swap had no net effect on the amount of city gas tax revenues, but did allow the state some flexibility in using gas tax revenues to pay state bond debt service — which they could not do under Prop42 rules. The passage of Prop26 in November 2010 meant that the swap had to be re- enacted with a two- thirds vote of the legislature. Prop22, passed in November 2010, also limited the use of HUTA for bond debt and general fund relief. A work- around solution was devised with the support of state and local interests which allows the state to use weight fees rather than the excise tax to pay for transportation- related bond debt service. The Governor has signed ABIOS, the budget trailer bill that revises and re- implements the motor vehicle fuel tax swap for compliance with Prop26 and Prop22. This means that cities and counties will continue to receive Streets and Highways Code Section 2103 funds Instead of Prop42 funds. The dollar amounts are the same over time but 1) they are allotted monthly, 2) they may be used for the more broad HUTA uses (see Streets and Highways Code Section 2101), and 3) the Prop42 MOE does NOT apply (this was clarified in the signed legislation). Estimates of city by city and county by county HUTA allocations may be found at http:// www. californiacityfinance .com/gTRANSPORTATION (see "HUTA Update ") • Williamson Act The California Land Conservation Act of 1965 (also known as the Williamson Act) protects over 16 million of the state's 29 million acres of agricultural land through 10 to 20-year contracts restricting land to agricultural and open space uses. In return, restricted parcels are assessed for property tax purposes at a rate consistent with their actual use, rather than potential market value. State payments partially reimburse cities and counties for property tax losses under the program. Over the last decade, the state 2217 Isle Royale Lane • Davis, CA • 95616 -6616 phone /fax: 530.758.3952 • coleman @munil.com • www.CaliforniaCityFinance.com